Intrinsic value of Xcerra - XCRA

Previous Close

$14.27

  Intrinsic Value

$21.79

stock screener

  Rating & Target

str. buy

+53%

Previous close

$14.27

 
Intrinsic value

$21.79

 
Up/down potential

+53%

 
Rating

str. buy

We calculate the intrinsic value of XCRA stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  11.70
  11.03
  10.43
  9.88
  9.40
  8.96
  8.56
  8.20
  7.88
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.91
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
Revenue, $m
  436
  485
  535
  588
  643
  701
  761
  823
  888
  956
  1,026
  1,099
  1,174
  1,253
  1,335
  1,420
  1,509
  1,601
  1,697
  1,798
  1,902
  2,011
  2,125
  2,244
  2,368
  2,498
  2,634
  2,775
  2,924
  3,079
Variable operating expenses, $m
  254
  281
  310
  340
  372
  404
  439
  474
  511
  550
  584
  626
  669
  714
  760
  809
  859
  912
  967
  1,024
  1,083
  1,145
  1,210
  1,278
  1,349
  1,423
  1,500
  1,581
  1,665
  1,754
Fixed operating expenses, $m
  141
  144
  147
  151
  154
  157
  161
  164
  168
  172
  175
  179
  183
  187
  191
  195
  200
  204
  209
  213
  218
  223
  228
  233
  238
  243
  248
  254
  259
  265
Total operating expenses, $m
  395
  425
  457
  491
  526
  561
  600
  638
  679
  722
  759
  805
  852
  901
  951
  1,004
  1,059
  1,116
  1,176
  1,237
  1,301
  1,368
  1,438
  1,511
  1,587
  1,666
  1,748
  1,835
  1,924
  2,019
Operating income, $m
  42
  59
  78
  97
  118
  139
  162
  185
  209
  235
  266
  294
  322
  352
  383
  416
  450
  485
  522
  561
  601
  643
  687
  733
  782
  832
  885
  941
  999
  1,060
EBITDA, $m
  51
  70
  89
  109
  130
  152
  175
  199
  224
  250
  277
  305
  335
  366
  398
  431
  466
  502
  540
  580
  621
  664
  710
  757
  807
  859
  913
  970
  1,030
  1,093
Interest expense (income), $m
  1
  1
  2
  3
  4
  4
  5
  6
  7
  8
  9
  11
  12
  13
  14
  16
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  36
  39
  41
  43
Earnings before tax, $m
  40
  57
  75
  94
  113
  134
  155
  178
  201
  225
  256
  282
  309
  338
  368
  399
  431
  465
  501
  538
  576
  617
  659
  703
  749
  798
  849
  902
  958
  1,017
Tax expense, $m
  11
  15
  20
  25
  31
  36
  42
  48
  54
  61
  69
  76
  84
  91
  99
  108
  116
  126
  135
  145
  156
  166
  178
  190
  202
  215
  229
  244
  259
  275
Net income, $m
  30
  42
  55
  68
  83
  98
  113
  130
  147
  164
  187
  206
  226
  247
  269
  291
  315
  340
  365
  392
  421
  450
  481
  513
  547
  583
  620
  659
  700
  742

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  416
  462
  510
  560
  613
  668
  725
  784
  846
  910
  977
  1,046
  1,119
  1,194
  1,271
  1,353
  1,437
  1,525
  1,617
  1,712
  1,812
  1,915
  2,024
  2,137
  2,255
  2,379
  2,508
  2,643
  2,785
  2,933
Adjusted assets (=assets-cash), $m
  416
  462
  510
  560
  613
  668
  725
  784
  846
  910
  977
  1,046
  1,119
  1,194
  1,271
  1,353
  1,437
  1,525
  1,617
  1,712
  1,812
  1,915
  2,024
  2,137
  2,255
  2,379
  2,508
  2,643
  2,785
  2,933
Revenue / Adjusted assets
  1.048
  1.050
  1.049
  1.050
  1.049
  1.049
  1.050
  1.050
  1.050
  1.051
  1.050
  1.051
  1.049
  1.049
  1.050
  1.050
  1.050
  1.050
  1.049
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
  1.050
Average production assets, $m
  60
  66
  73
  81
  88
  96
  104
  113
  122
  131
  141
  151
  161
  172
  183
  195
  207
  219
  233
  246
  261
  276
  291
  307
  324
  342
  361
  380
  401
  422
Working capital, $m
  112
  124
  137
  151
  165
  179
  195
  211
  227
  245
  263
  281
  301
  321
  342
  364
  386
  410
  435
  460
  487
  515
  544
  574
  606
  639
  674
  711
  749
  788
Total debt, $m
  35
  50
  66
  82
  99
  117
  136
  155
  175
  196
  218
  240
  264
  288
  313
  340
  367
  396
  426
  457
  489
  523
  558
  595
  633
  673
  715
  759
  805
  853
Total liabilities, $m
  135
  150
  166
  182
  199
  217
  236
  255
  275
  296
  318
  340
  364
  388
  413
  440
  467
  496
  525
  556
  589
  622
  658
  695
  733
  773
  815
  859
  905
  953
Total equity, $m
  281
  312
  344
  378
  414
  451
  489
  529
  571
  614
  659
  706
  755
  806
  858
  913
  970
  1,029
  1,091
  1,156
  1,223
  1,293
  1,366
  1,442
  1,522
  1,606
  1,693
  1,784
  1,880
  1,980
Total liabilities and equity, $m
  416
  462
  510
  560
  613
  668
  725
  784
  846
  910
  977
  1,046
  1,119
  1,194
  1,271
  1,353
  1,437
  1,525
  1,616
  1,712
  1,812
  1,915
  2,024
  2,137
  2,255
  2,379
  2,508
  2,643
  2,785
  2,933
Debt-to-equity ratio
  0.130
  0.160
  0.190
  0.220
  0.240
  0.260
  0.280
  0.290
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.370
  0.380
  0.380
  0.390
  0.400
  0.400
  0.400
  0.410
  0.410
  0.420
  0.420
  0.420
  0.430
  0.430
  0.430
Adjusted equity ratio
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675
  0.675

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  30
  42
  55
  68
  83
  98
  113
  130
  147
  164
  187
  206
  226
  247
  269
  291
  315
  340
  365
  392
  421
  450
  481
  513
  547
  583
  620
  659
  700
  742
Depreciation, amort., depletion, $m
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  11
  12
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  29
  31
  33
Funds from operations, $m
  39
  52
  66
  80
  95
  110
  127
  144
  161
  180
  198
  218
  238
  260
  283
  306
  331
  357
  383
  412
  441
  471
  504
  537
  572
  609
  648
  688
  731
  775
Change in working capital, $m
  12
  12
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
Cash from operations, $m
  28
  40
  53
  66
  81
  96
  111
  128
  145
  162
  180
  199
  219
  240
  262
  285
  308
  333
  359
  386
  414
  444
  474
  507
  540
  576
  613
  652
  693
  735
Maintenance CAPEX, $m
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -29
  -31
New CAPEX, $m
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
Cash from investing activities, $m
  -10
  -12
  -12
  -13
  -14
  -15
  -15
  -17
  -18
  -18
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -47
  -49
  -52
Free cash flow, $m
  17
  29
  41
  53
  67
  81
  96
  111
  127
  144
  160
  178
  197
  217
  237
  259
  281
  304
  329
  354
  381
  408
  437
  468
  500
  533
  568
  604
  643
  683
Issuance/(repayment) of debt, $m
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  23
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  14
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  23
  24
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
Total cash flow (excl. dividends), $m
  32
  44
  56
  70
  84
  99
  114
  130
  147
  165
  182
  201
  220
  241
  263
  285
  308
  333
  358
  385
  413
  442
  473
  505
  538
  573
  610
  648
  689
  731
Retained Cash Flow (-), $m
  -29
  -31
  -32
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -76
  -80
  -83
  -87
  -91
  -95
  -100
Prev. year cash balance distribution, $m
  62
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  64
  13
  24
  36
  48
  62
  76
  90
  105
  121
  136
  154
  172
  190
  210
  230
  251
  274
  297
  321
  346
  372
  399
  428
  458
  490
  523
  557
  593
  631
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  62
  12
  21
  30
  38
  45
  51
  56
  61
  64
  65
  66
  65
  64
  62
  59
  55
  50
  46
  41
  36
  31
  26
  22
  18
  14
  11
  9
  6
  5
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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Xcerra Corporation is a provider of test and handling capital equipment, interface products, test fixtures and related services to the semiconductor and electronics manufacturing industries. The Company operates through six segments: Semiconductor Test, Semiconductor Handlers, Contactors, PCB Test, Probes/Pins and Fixtures. The Semiconductor Test segment includes operations related to the design, manufacture and sale of automated test equipment for the semiconductor industry that is used to test system-on-a-chip, digital, analog and mixed signal integrated circuits. The Semiconductor Handlers segment includes operations related to the design, manufacture and sale of test handlers used in the testing of integrated circuits. The Contactors segment includes operations related to the design, manufacture and sale of test contactors. The PCB test segment includes operations related to design, manufacture and sale of equipment used in the testing of bare and loaded printed circuit boards.

FINANCIAL RATIOS  of  Xcerra (XCRA)

Valuation Ratios
P/E Ratio 33.7
Price to Sales 2
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 28.7
Price to Free Cash Flow 38.8
Growth Rates
Sales Growth Rate 20.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 133.3%
Cap. Spend. - 3 Yr. Gr. Rate -2.6%
Financial Strength
Quick Ratio 40
Current Ratio 0
LT Debt to Equity 5.4%
Total Debt to Equity 6.7%
Interest Coverage 30
Management Effectiveness
Return On Assets 5.8%
Ret/ On Assets - 3 Yr. Avg. 5.6%
Return On Total Capital 7.2%
Ret/ On T. Cap. - 3 Yr. Avg. 6.8%
Return On Equity 7.7%
Return On Equity - 3 Yr. Avg. 7.7%
Asset Turnover 1
Profitability Ratios
Gross Margin 44.2%
Gross Margin - 3 Yr. Avg. 44.2%
EBITDA Margin 9.2%
EBITDA Margin - 3 Yr. Avg. 7.7%
Operating Margin 7.2%
Oper. Margin - 3 Yr. Avg. 4.9%
Pre-Tax Margin 7.4%
Pre-Tax Margin - 3 Yr. Avg. 5.4%
Net Profit Margin 5.9%
Net Profit Margin - 3 Yr. Avg. 5.4%
Effective Tax Rate 20.7%
Eff/ Tax Rate - 3 Yr. Avg. -24.5%
Payout Ratio 0%

XCRA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the XCRA stock intrinsic value calculation we used $390.771 million for the last fiscal year's total revenue generated by Xcerra. The default revenue input number comes from 0001 income statement of Xcerra. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our XCRA stock valuation model: a) initial revenue growth rate of 11.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for XCRA is calculated based on our internal credit rating of Xcerra, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Xcerra.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of XCRA stock the variable cost ratio is equal to 58.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $138 million in the base year in the intrinsic value calculation for XCRA stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Xcerra.

Corporate tax rate of 27% is the nominal tax rate for Xcerra. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the XCRA stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for XCRA are equal to 13.7%.

Life of production assets of 12.9 years is the average useful life of capital assets used in Xcerra operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for XCRA is equal to 25.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $313.679 million for Xcerra - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 54.915 million for Xcerra is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Xcerra at the current share price and the inputted number of shares is $0.8 billion.

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